Monday, April 13, 2015

Two railway firms in row over payments

Dar es Salaam. A row is brewing between two sister firms--the Reli Assets Holding Company (Rahco), which is state-owned and responsible for railway infrastructure, and Tanzania Railway Limited (TRL).

In an unprecedented move, Rahco is threatening to take the latter to court for allegedly defaulting on concession fee payments for more than seven years. The firm took over all activities previously undertaken by the Tanzania Railway Corporation (TRC), including developing, promoting and managing rail infrastructure assets.

The law allows Rahco to delegate the task of providing rail transport services and the company granted TRL the power to run trains under a concession agreement. Rahco Managing Director Benhadard Tito told The Citizen in an exclusive interview that one of the biggest challenges Rahco faces is TRL’s failure to pay concession fees and other statutory obligations--and this has crippled Rahco’s performance. TRL now owes Rahco Sh194 billion in unpaid fixed concession fees.

“TRL also owes us huge amounts in terms of variable concession fees that are unknown because the company has not been audited for the past four years,” said Mr Tito.

Rahco argues that TRL’s failure to pay the concession fees has significantly affected its performance. It argues that workers currently receive  60 per cent of their salaries from the government due to the fact that the company does not have enough funds to run its activities, including paying salaries.

Said Mr Tito: “It is a shame for an institution like Rahco to depend on the government for its salaries. I urge the government to direct TRL to pay us the required concession fees so we can get rid of government dependency, otherwise the issue can only be settled in court.”

If TRL does not pay the concession fees, it will continue eating into Rahco’s account, making it impossible for the company to run. “The implication is we are owned by the same father--the government--who is very sympathetic to TRL,” Mr Tito explained.

TRL has paid the concession fees only once--and that was in the first quarter of 2007, when it paid $1.5 million.  “I hate it when people say we depend on the government to run some of our activities,” Mr Tito added, “but the problem is that the government is not directing TRL to pay us the concession fees as agreed so we can be independent.”

Meanwhile, Rahco is in the process of terminating its concession agreement with TRL so that it can put in place another measure that will make TRL pay up. “We agreed with the Ministry of Transport, under the Big Results Now (BRN) initiative, that the concession agreement has failed,” said Mr Tito, “so we are discussing the best way to terminate the contract and replace it.”

He believes, though, that the truck access fee would be more effective going forward. But, according to TRL Managing Director Kipallo Kisamfu, the debt is more historical than real. “The debt referred here goes back to the days when TRL was under RITES of India, who ran the company for three years from 2007,” he added. “RITES failed to pay the concession fees and the contract was terminated.”

When the government bought the TRL shares from RITES, it acquired all its liabilities, including debts. “TRL it was in very bad shape, to the extent that it was impossible to generate cash for running all our activities, including paying the concession fee.” Mr Kisamfu said. “All I can say is that we are unable to pay the debt.”

Given TRL’s poor financial condition, according to Eng Kisamfu, the government--through BRN--decided to terminate the concession contract and replace it with another agreement.“We will be ready to pay any truck access fee if introduced,” he added. “But we don’t have the capacity to pay the debt now.”

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